American auto profits showing signs of beating 1990s’ best

The 17% surge in U.S. auto sales last month pushed the annual rate to a pre-recession, boom-time level. Even more significant, Detroit automakers are reaping profits not seen since the turn of the century.

Sales totaled 1.5 million in August, the most in one month since May 2007. What’s more, the automotive comeback crossed an important milestone as the industry’s annual selling rate reached 16.1 million, the fastest since October 2007 and a volume that signifies a robust car market.

As the fifth anniversary of the collapse of Lehman Brothers approaches, Detroit has come full circle, from bankruptcy to boom. General Motors Co., Ford Motor Co. and Chrysler Group LLC combined to earn $13.5 billion last year, even as industry sales were 17% below the peak of 17.4 million set in 2000. Those fatter profits come from trimmer companies that radically restructured operations, shed debts and overhauled their lineups to field their most competitive cars in a generation.

“Any question that the industry is back should be put to rest,” said Jeff Schuster, auto analyst for researcher LMC Automotive. “In 2007, there was no margin on cars; the Detroit Three were giving them away. Now we’re seeing a much different environment, where they’re much more competitive.”

Strong Cars

GM rose 1.3% to $36.31 and Ford rose 2.4% to $17.32 at 3:07 p.m. in New York. Yesterday, GM and Ford shares rose the most since December. GM gained 5% to $35.85, and Ford rose 3.5% to $16.91. For the year through yesterday, Ford soared 31% and GM jumped 24%, outpacing the 16% gain of the Standard & Poor’s 500 Index.

In the first half of this year, the Detroit Three made more than $6 billion before the industrywide sales rate breached 16 million from last year’s 14.5 million. They’re making money from models that once were loss leaders, such as small cars like GM’s Chevrolet Cruze and family sedans like Ford’s Fusion, which jumped 14% last month.

GM’s total sales rose 15% last month, making August its best month since September 2008, the month that Lehman Brothers Holdings Inc. collapsed. Ford was up 12% and said it had its best month of retail sales since 2006. Deliveries for Chrysler, majority-owned by Fiat SpA, climbed 12% in August, the automaker’s 41st straight month of gains.

Asian automakers combined for their best U.S. sales month ever. Toyota Motor Corp. deliveries surged 23%, while Honda Motor Co. and Nissan Motor Co. each had their best August.

“We see the market continuing at this pace, going as high as the mid-16s,” Bob Carter, senior vice president of Toyota’s U.S. sales unit, told the Automotive Press Association in Detroit today. “We certainly don’t see 10% growth year- over-year like we’ve just experienced. But we see very moderate growth.”